Here's a screen shot of my Greeks: Now, as I look at this I see that my theta is in a pretty good place. Net Liq of the account is at $173,000, so I'm looking at a minimum theta of 173. I can go all the way up to 1/2 of 1% of the net liq during times of high volatility. Delta/vega ratio should be 1/2, so as I look at this (if all else remains constant) I will be looking to add short delta tomorrow to get things more in line. Of course, this all depends on what happens tomorrow. As you can also see, I'm using buying power of $35,000 which is less than 30% of buying power. Now, here's a screen shot of the risk graph on the analyze tab: Here's a look at stressing the account down 20% with a 30 point increase in volatility and the result on buying power: Here's the same downward stressing at 20% but with margin requirement on the right hand side instead of buying power: Here's the screen shot of the price slices with 0 volatility increase so that you can see the effects of a 15% increase. And here you can see the effect of a 15% increase on buying power. So, unless you are seeing something that I'm not, I think the managed Greeks look pretty well under stress. What do you think? Bobby
Using theta as the key risk metric is very smart, that is what most seasoned risk managers would look at. Everything else can be fudged/masked/misinterpreted, but your theta is a good indicator of risk - if you are collecting $100 per day you have more money at risk then if you are collecting $50. As a RM monitoring tool and for the purposes of gauging leverage what you got is pretty reasonable. Have you correlated your simulated losses to the historical events - i.e. what would your book do over Lehman bankruptcy, in August 2011 or over September 2001? My preference would be to use a broader collection of stresses and, if you are selling delta-neutral (especially if you are carrying delta to offset your vega risk), include upside stresses too. My worst one-day loss came from having short upside gamma during a market melt-up. I can't see the figures for some reason, maybe it's because I am connecting from the office. Could you just post numbers?
That would be my worse case scenario as well. What happened to volatility during the melt-up? Did it go up? Today was one of those weird days where I thought my P/L would be greener given the negative deltas I carry, but the bump in VIX cut into my pi(e). Same thing happen to you, Bobby?
I can't see the images on either my ipad or PC either. Would really like to see them, appreciate what you're doing...
Especially since he claimed to do the improbable: make a lot of money being short like 12 vol in a 15 vol move that included a substantial vol increase.
And this happens with option sellers more than anyone else...Tastytraders being the current fad. If you want to hear some real hubris, listen to this recent interview with Sosnoff: https://chatwithtraders.com/ep-087-tom-sosnoff/